Notren, Inc., a U.S. company, and SWT, a Singapore company, entered into a contract
under which SWT is to ship party supplies to Notren. One of the terms of the contract
states, “Any disputes that arise under this contract will be resolved in the courts of
Singapore.” This contract term is a:
a. letter of credit.
b. choice of language clause.
c. choice of forum clause.
d. draft clause.
Assume that Bubba orders 15 cases of BBQ chips from Mays Potato Chips for his
restaurant, Bubba’s BBQ. Mays ships 15 cases of regular chips by mistake. If Bubba
decides to keep the regular chips, in spite of the nonconformity with the contract, then
the destruction of the chips when a water pipe breaks in the food storage room will
result in:
a. Mays having to bear the loss, because it shipped nonconforming goods to Bubba.
b. Mays having to bear the loss, because it failed to insure the chips.
c. Bubbas having to bear the loss, because he accepted delivery of the nonconforming
chips.
d. Bubbas having to bear the loss, because it was a sale on approval contract.
Which of the following is an example of an exculpatory clause?
a. Creditor charges 38% interest on a loan.
b. Seller is not responsible for property damage regardless of the cause of the injury.
c. Buyer agrees to pay any costs of litigation.
d. Employee agrees to never work for a competing company.
The maximum rate of interest for credit transactions is established by:
a. state law.
b. federal law.
c. the Federal Reserve Board.
d. the FTC.
Ethics is the study of:
a. sovereign immunity.
b. how people should act.
c. respondeat superior.
d. victimization.
All of the following are characteristics of a closely held corporation EXCEPT:
a. the shares are publicly traded.
b. the corporation can typically operate without a board of directors.
c. the shareholders usually restrict share transfer.
d. minority shareholders are provided more protection than in regular corporations.
An agreement in which parties intend to form a valid bargain, but a court declares that
some rule of law prevents enforcing it.is:
a. void
b. voidable
c. Unenforceable
d. none of the above.
Mark’s home had burned to the ground. When he met with his insurance adjuster, she
accused him of burning down the house, and said she would have him criminally
prosecuted if he didn’t settle the claim for much less than the house was worth. Mark
agreed to the settlement. If he changed his mind, he can probably rescind the settlement
on the basis of:
a. fraud.
b. duress.
c. undue influence.
d. mistake.
When a principal is partially disclosed:
a. the agent and principal will be jointly and severally liable on the contract.
b. the agent and principal will be only jointly liable on the contract.
c. only the principal can be liable.
d. only the agent is liable.
Employees of Mega Corp. have gone out on strike seeking better pay. Mega Corp.
announces that if the union does not end the strike it will begin hiring replacement
workers. Which statement is correct?
a. Hiring replacement workers during a strike is an unfair labor practice.
b. Mega Corp can only hire replacement workers if the collective bargaining agreement
expressly gives the company the right to do so.
c. Mega Corp can only hire replacement workers if it gives the union 14 days’ notice
prior to actually bringing in the replacement employees.
d. Mega Corp can hire replacement workers at any time during a strike.
Sprock is a holder in due course on an instrument issued by Klingon. Which of the
following defenses could be successfully raised by Klingon?
a. Forgery.
b. Prior payment.
c. Breach of contract.
d. Fraud in the inducement.
Vince has begun forgetting things and is becoming very difficult to get along with. He
is 85, has been ill, and is very fond of his housekeeper Annie. He gives a deed to Annie
for all of his real property. At Vince’s death, his children, who got only his photograph
albums according to the will, ask that the deed be set aside and the land be put back in
the estate for purposes of division among all the children. The probable result will be:
a. since Vince was 85 he was probably incompetent and the court would rule for the
children.
b. clearly Annie used her position of dominance to persuade Vince to deed her the
property, and it will be set aside.
c. unless the children can prove that Vince was unable to understand what he was doing,
or that Annie used her position to improperly influence Vince, Annie can keep the
property.
d. None of the above.
A marketing representative who is tempted to engage in price-fixing due to heavy
competition and similar prices for competitors’ products should:
a. emphasize factors of her product that do not involve price.
b. emphasize service, reliability, and other factors of her company.
c. understand the serious criminal and civil penalties of engaging in price-fixing.
d. All the above.
In 1932, Congress passed what legislation prohibiting federal court injunctions in
nonviolent labor disputes, thereby declaring that workers should be permitted to
organize unions and use their collective power to achieve legitimate economic ends?
a. The Sherman Act.
b. The Norris-LaGuardia Act.
c. The National Labor Relations Act.
d. The Labor-Management Relations Act.
Dr. Gavornne advises his very ill patients to prepare a living will. The purpose of a
living will is:
a. to make a disposition of property.
b. to express a desire not to have extreme medical treatment that would prolong their
lives.
c. to transfer life insurance.
d. to consent to organ donation.
Ron operates a garbage pickup business. He contracts to pick up garbage from an
apartment complex for the next 52 weeks at a price of $150 per week. Unexpectedly,
the landfill center where Ron takes the garbage to dispose of it, files for bankruptcy. As
a result, Ron must travel an additional 100 miles to the nearest landfill center, turning
Ron’s expected profit into a loss of $40 per week. Ron’s best argument in support of his
petition to be discharged from the contract is:
a. the mail box rule.
b. commercial impracticability.
c. frustration of purpose.
d. true impossibility.
Which statement is correct concerning judicial review of an administrative agency’s
action?
a. Courts usually accept the facts of the case as determined by the agency and often
defer to the agency’s interpretation of the law.
b. Courts conduct a de novo review of the case.
c. Courts ignore the facts of the case.
d. Courts substitute their opinion for that of the agency.
Marco Manufacturing contracted to sell Kurtz Industries 3,000 iron clasps. The contract
specified: F.O.B. Kurtz Industries. Upon arrival and inspection, the goods were rejected
by Kurtz Industries because they did not conform to the contract specifications. In
transit back to Marco Manufacturing, the common carrier’s truck overturned and
completely destroyed the clasps. Which statement is correct?
a. Marco may sue Kurtz for the contract price, as risk of loss transferred to Kurtz at the
F.O.B. point.
b. Kurtz will not be liable for the purchase price. The risk of loss had not yet transferred
since the goods were nonconforming.
c. The loss will be split between the parties upon a 50/50 basis.
d. The loss will be assigned to the party who could best bear the loss.
What is the Justice Department’s current position relative to reciprocal dealing
agreements?
a. The Justice Department actively enforces this illegal activity.
b. The Justice Department is only concerned about these agreements if a large, national
company is involved.
c. The Justice Department only gets involved if such an agreement will foreclose a
significant share of the market and if the participants agreed not to buy from other
competitors.
d. None of the above is correct.
Hardhat Machine Company sold goods to Irish Eyes Company of Northern Ireland. Big
Bank issued a letter of credit on behalf of Irish Eyes and the letter was given to
Hardhat. The “account party” is:
a. Irish Eyes.
b. Hardhat Machine Company.
c. Big Bank.
d. None of the above.
The officers of a corporation are:
a. chosen by the board of directors.
b. appointed by the president of the company.
c. elected by shareholders.
d. appointed by the Secretary of State.
All but which of the following serves as a discharge of a negotiable instrument:
a. payment.
b. cancellation.
c. alteration.
d. presentation.
Dick steals Jane’s camcorder and sells it to Sid. Jane can recover the camcorder from
Sid:
a. under any circumstances.
b. only if Sid knew that the camcorder was stolen from Jane.
c. only if Sid did not know that the camcorder was stolen from Jane.
d. only if Sid paid less than the fair market value for the camcorder.
The Environmental Protection Agency was investigating whether Exgrow, Inc. violated
the Clean Air Act. Exgrow refused to give the EPA its computerized reports concerning
pollution. To get the reports, EPA should use:
a. a stare decisis.
b. a de novo.
c. an excaliber.
d. a subpoena duces tecum.
Kathleen filed for voluntary bankruptcy and the automatic stay went into effect. The
automatic stay:
a. acts to automatically discharge Kathleen’s debts.
b. stops any and all acts to collect, assess, or recover a claim against Kathleen that arose
before she filed bankruptcy.
c. stops only secured creditors from taking any act to collect, assess, or recover a claim
against Kathleen that arose before she filed bankruptcy.
d. stops creditors from trying to collect from Kathleen, but it does not stop them from
filing lawsuits against her.
Important steps in the criminal process, in the proper order, include:
a. search, arrest, probable cause hearing, indictment, arraignment, plea bargain, and
trial.
b. arraignment, booking, bail hearing, trial, and grand jury indictment.
c. arrest, probable cause hearing, motion to suppress, booking, and trial.
d. indictment, arrest, probable cause hearing, plea bargain, arraignment, trial, and
appeal.
Jennifer has offered to sell her laptop computer for $750 to Jack. She tells Jack that the
computer is only six months old but, in fact, it is three years old, and Jennifer wants to
unload the lemon. Jack agrees to buy the computer based on Jennifer’s representations.
This contract is:
a. a void agreement because of the fraud involved.
b. a voidable contract, one that Jack can void.
c. a voidable contract, one that Jennifer can void.
d. a void contract because of the UCC.
Which of the following persons is an agent?
a. Diane, a shoe salesperson for a retail store.
b. Tim, a real estate broker for a large real estate company.
c. Craig, a telephone marketing employee.
d. All the above.
Floyd offers to sell his 1967 Ford Mustang convertible to Tim. Before they conclude
their negotiations, Floyd dies. Which of the following is true?
a. Floyd’s heirs must sell the car to Tim.
b. Floyd’s heirs must continue to negotiate the offer and sell the car, if a reasonable
price can be determined.
c. The offer terminates automatically upon Floyd’s death.
d. There is a contract if Tim accepts before learning of Floyd’s death.
A third party beneficiary’s status occurs:
a. after an assignment and delegation.
b. when the third party is informed of the contract.
c. when the third party beneficiary agrees to the contract terms.
d. when the contract is created.
Karen has filed for bankruptcy. Who has the authority to confirm or reject a plan of
payment, and what factors will be considered when deciding whether to approve a
repayment plan under Chapter 13?
One of the directors of Independent Pallet Mill purchases 100 acres of timberland. In
order for him to sell the timber from this land to Independent, what must he do? If he
does not act properly in this situation, what duty would he violate, and what would be
the result?
It is legal for websites to sell source code for viruses.
Mountain Ridge Bank has been named trustee for a $100,000 trust Fred and Martha
Betts established for “the living children of the grantors. List the requirements for
establishing a trust. Identify the primary obligation of the trustee and discuss the
fiduciary duty of the trustee.
Hilda owes Lex $3,000, which is an undisputed amount. If she offers him her car in full
settlement of the debt and he accepts, the agreement is binding and he can no longer
claim she owes him anything on the original debt.
A possessor of non-negotiable paper has the same rights as the person who made the
original contract.
Generally, mandatory arbitration provisions in a contract are valid.
Roger, a minor, buys a stereo from Tuneland, Inc. Roger uses the stereo for a few
months, returns it to Tuneland, and demands his money back. In a majority of states,
Roger may return the stereo and he does not have to pay for the use of the stereo or the
damages.
Singleton, an eighty-year-old widower, remarried. The next day, he made a will leaving
everything to his son, Joey. A week after his marriage, Singleton died. How will his
estate be handled?
To form an LLC, a charter and an operating agreement must be filed with the Secretary
of State in the jurisdiction where the business will operate.
List and discuss the elements necessary to establish negligence.
A gambling contract is legal unless it is specifically prohibited by state statute.
Lorene, an artist, orally agrees to sell Sabrina a painting for $600. While Lorene is busy
talking on the phone, Sabrina writes her a note on the back of an envelope she finds in
her purse. The signed note states that she will stop by the studio to pick up the painting
within the week. Sabrina changes her mind about the painting, and when Lorene sues to
enforce the contract, Sabrina defends on the basis of the statute of frauds. Sabrina will
succeed with this defense.
Fowler Bros. has applied to Gibralter Bank for a $50,000 loan for its business
expansion. If Fowler Bros. plans to use its account at Gibralter Bank as collateral,
discuss what the bank needs to do for a security interest to attach.
Tim is buying a farm. A general warranty deed is the best type of deed for Tim.